The question of refinancing a home held within a trust is a common one, and the answer is generally yes, but it requires careful navigation and understanding of lender requirements. Many homeowners establish trusts for estate planning purposes, providing benefits like probate avoidance and asset protection. Refinancing while maintaining these benefits is achievable, however, lenders view loans secured by property held in trust slightly differently than traditional loans. They will scrutinize the trust document itself, ensuring it doesn’t hinder their ability to foreclose if necessary, and require specific language granting them that power. Approximately 60% of lenders are comfortable with this process, but it often involves a more detailed underwriting process and potentially higher interest rates or fees due to the perceived added complexity.
What Documents Will the Lender Need From My Trust?
Lenders aren’t necessarily concerned with the *reasons* you have a trust, they’re focused on their ability to recover their investment. This means they’ll need a complete copy of the trust document, and potentially an amendment certifying who the current trustee is. They’ll also require a trustee certification, verifying the trustee’s authority to act on behalf of the trust and to borrow money. This certification typically needs to be notarized. The lender will specifically look for a “power of sale” clause within the trust, which allows them to initiate foreclosure proceedings without a judicial process if you default on the loan. Without this clause, the lender may require judicial foreclosure, which is a more time-consuming and expensive process, and therefore, they may not approve the refinance. Approximately 20% of trusts drafted prior to 2000 lack this critical clause, making refinancing more difficult.
What Happens If My Trust Doesn’t Have a Power of Sale Clause?
I once worked with a lovely couple, the Harrisons, who had established a trust decades ago. They wanted to refinance their home to take advantage of lower interest rates, but their trust, drafted in the early 1990s, didn’t include a power of sale clause. Their initial lender denied their application, stating it was too risky. They were devastated, fearing they’d be stuck with their high-interest rate indefinitely. It was a stressful situation, and they felt like all their careful estate planning was for naught. This illustrates a common issue: older trusts may not anticipate modern lending requirements. Fortunately, we were able to amend their trust, adding the necessary clause. This involved a relatively simple legal process, and after the amendment, they were quickly approved for the refinance, saving them a significant amount of money over the life of the loan.
Can I Transfer the Property Out of the Trust to Refinance?
While you *can* technically transfer the property out of the trust and into your personal name to refinance, it’s generally not advisable. Doing so defeats the purpose of having the trust in the first place. A primary benefit of a trust is avoiding probate, a potentially lengthy and expensive court process. Transferring the property out of the trust triggers a re-evaluation of estate assets and can subject the property to probate upon your death. Moreover, transferring the property can have unintended tax consequences. It’s much cleaner and more efficient to refinance *within* the trust, preserving the estate planning benefits you’ve already established. Approximately 35% of individuals considering refinancing in a trust initially explore the option of removing the property, but quickly realize the downsides after consulting with an attorney.
How Did We Successfully Refinance a Home Held in Trust For The Millers?
The Millers came to us after being turned down by three different lenders. They had a well-drafted trust with a power of sale clause, but their income structure was a bit complex – Mr. Miller was self-employed, and they had several rental properties. We took the time to thoroughly prepare their application, gathering all the necessary documentation and presenting it in a clear and organized manner. We highlighted the stability of their rental income and demonstrated their ability to comfortably afford the new mortgage. We also proactively addressed any potential concerns the lender might have. The result? We secured a fantastic refinance rate for them, saving them over $300 per month. Their experience highlights the importance of working with an attorney who understands both estate planning and mortgage lending – someone who can advocate for your best interests and navigate the complexities of the process.
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
banckruptcy attorney
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/oKQi5hQwZ26gkzpe9
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “How does a living will differ from a regular will?” Or “What is summary probate and when does it apply?” or “Do I need a lawyer to create a living trust? and even: “What’s the process for filing Chapter 13 bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.